No it shouldn't, relisticly 2 squads that have suffered kia's would be merged together to make 1 squad at full strength

that's not the way the system works Philson, its probably the only thing it has in common with 40k

Quote (philson)

should it count as being destroyed for campaign purposes.

I would say that if a unit is routed like that then you leave the figures in play as if they where still a fully functional unit(including leaving their card in the activation cue) but when it gets to their turn they have to do a run move towards their own table edge and if they make it off they survive but they could still be gunned down by the enemy in the process